Johnson & Johnson agreed to pay $8.9 billion to settle tens of thousands of lawsuits alleging talc in its iconic baby powder and other products caused cancer, the company said. The amount eclipses J&J’s initial offer of $2 billion.
The deal follows a January appeals court ruling invalidating J&J’s controversial two-step Texas bankruptcy maneuver, in which it sought to offload talc liability onto a subsidiary that immediately filed for bankruptcy protection. chapter 11.
This J&J subsidiary, LTL Management, filed for bankruptcy Tuesday evening for the second time with the intention of presenting a reorganization plan containing the proposed settlement to a judge as early as May 14, the subsidiary said in a statement. criminal record.
J&J said in a statement that about 60,000 talc applicants have accepted the proposal. And the subsidiary said in a court filing that J&J entered into new financing agreements with its subsidiary to avoid violating the appeal decision.
The appeals court’s rejection effectively increased the price for J&J to get rid of the sprawling talc litigation, after plaintiffs’ attorneys resisted the company’s tactics and prevailed.
J&J’s board of directors met over the weekend and approved payment of the much larger settlement to current and future plaintiffs with various gynecological cancers and mesothelioma, according to Mikal Watts, one of the attorneys. plaintiffs who negotiated the settlement.
J&J reiterated on Tuesday that its talc products are safe and do not cause cancer. Lawyers for the company said the talc claims lacked scientific merit and accused the plaintiffs’ lawyers of continuing to advertise for clients in the hope of extracting large sums of money.
The company still faces a significant risk that other plaintiffs will continue to oppose the settlement and re-appeal the case to the same court that previously dismissed the subsidiary’s bankruptcy – the Third Court of call from the United States to Philadelphia.
Lawyers representing thousands of plaintiffs issued a statement Tuesday evening opposing the settlement. “This sham deal doesn’t even pay the medical bills for most victims,” said Jason Itkin, founding partner of Houston-based law firm Arnold & Itkin LLP.
Reuters reported earlier on Tuesday that J&J was considering placing its talc subsidiary in bankruptcy proceedings a second time and that a lawyer for the company had approached plaintiffs’ lawyers in recent weeks to propose that the two parties work out a new settlement agreement that could be consummated in a bankruptcy of J&J’s second subsidiary. Last year, Reuters detailed secret two-step Texas planning by J&J and three other big companies in a series of reports exploring the companies’ attempts to evade prosecution through bankruptcies.
Under the terms of the proposed new settlement, plaintiffs diagnosed with cancer before April 1 would be paid by a bankruptcy trust within a year of a judge’s approval of the Chapter 11 plan creating it, according to Watts, the attorney. plaintiffs who helped broker the settlement. Claimants later diagnosed will have access to money set aside in the trust for the next 25 years.
The massive settlement emerged after the legal failure of J&J’s initial two-step bankruptcy in Texas, filed in October 2021. The new tactic was to use a Texas state law to split a sued company in half, then to transfer responsibility to one of the newly created entities. . LTL Management, the new subsidiary that absorbed the liabilities, declared bankruptcy almost immediately after its creation.
Plaintiffs’ attorneys described the J&J two-step as an abuse of the bankruptcy system by a multinational conglomerate with a market cap of more than $400 billion and unlikely to run out of money to pay cancer victims.
J&J and its subsidiary argued that bankruptcy served a greater good for all parties, including plaintiffs: restructuring could provide more just, efficient and equitable settlement payments than a “lottery” offered by the courts of trial, where some litigants get big rewards and others get nothing.
The appeals court in late March rejected the J&J subsidiary’s offer to delay the ruling as it seeks a review by the U.S. Supreme Court. On Tuesday, U.S. Bankruptcy Judge Michael Kaplan of New Jersey dismissed LTL’s previous bankruptcy, complying with an appeals court ruling that reversed his earlier decision approving the maneuver.
Watts, the plaintiffs’ attorney, told Reuters he believed enough plaintiffs agreed to the settlement to convince a bankruptcy judge to approve it. The number of agreements is crucial. In asbestos-related bankruptcies, a company needs 75% of claimant-creditors to approve a restructuring plan for a judge to approve it. This is a higher bar than in other types of bankruptcies.
A December 2018 Reuters investigation found that J&J had been aware for decades of tests showing its talc sometimes contained carcinogenic asbestos, but hid that information from regulators and the public. J&J said its baby powder and other talc products are safe, don’t cause cancer, and don’t contain asbestos.
The company announced in 2020 that it would stop selling its talc baby powder in the United States and Canada due to what it called “misinformation” about the product and later announced plans to stop selling it. stop worldwide in 2023.